I intend to accumulate wealth for my retirement, though it might seem a bit late as I am 33 years old now. At present, I have not invested in any real estate and hence my LIC takes care of my tax benefits as well. I want to move away from insurance to investment. Please suggest me steps for that direction. Also I would like to build a corpus of around Rs 60 lakh for my retirement benefit. I would like to enter stock market and build an investment of around Rs 1 lakh over a year and keep it ramping to Rs 3 lakh in the next 4 to 5 years' time.
Goals:
1. Want to invest Rs 1 lakh in stock market and keep it for next 4-5 years to generate a corpus of Rs 3 lakh.
2. Create a corpus of Rs 60 lakh for retirement.
Nandan
Your portfolio has a variety of insurance policies, from endowment policy to Unit Linked Insurance Plans (Ulips). These are not pure investment avenues contrary to popular understanding.
It's never too late to make your investment plan and build the portfolio. The first step to this will be reviewing the policy terms of your Ulips and plan to discontinue them over time. Generally, you must invest for the first three years in your Ulips. Also, withdrawal is possible only after three years.
Insurance linked investments prove to be less liquid, less transparent and more expensive investment vehicle. Since having adequate insurance cover for your life stage is crucial, consider a term insurance life cover and one accident insurance policy.
For your investment, we would suggest a set of investment guideline to evolve your plan.
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Avoid investing directly in stocks: This could prove fatal if you lack time and intellectual resources to pursue this with conviction and discipline.
Invest your long-term savings in equity funds: Choose some good funds and invest regularly. Go for a well-diversified fund and ignore narrowly focused portfolios, sector or thematic funds. The two funds you own - LIC Top 100 Fund and UTI Infrastructure Advantage Fund, both are relatively new with no track record.
Invest regularly: Don't try to time the market. Ensure to invest through the lean period in market to benefit from rupee-cost averaging.
We suggested a conservative model portfolio going by the choice of your investments so far. Four funds - DSPBlack Rock Top 100, Franklin India Prima Plus and Birla Sun Life Front Line Equity Fund, three diversified equity funds with good track record superior risk-adjusted performance will form core of your portfolio. We also suggest a sizable fixed income for overall stability of the portfolio. For this, we suggest Kotak Flexi Debt Fund.
| Funds | % Allocation |
| Birla Sun Life Frontline Equity-G | 21.3 |
| DSPBR Top 100 Equity Reg-G | 22.25 |
| Franklin India Prima Plus-G | 27.75 |
| Kotak Flexi Debt Regular-G | 28.7 |
| Rank | % Allocation |
| Large Cap | 70.37 |
| Mid Cap | 18.22 |
| Small Cap | 3.63 |
| Not Classified | 7.78 |
To avail Section 80C, you can replace any of the above equity funds with a similar ELSS. Our selection include Magnum Tax Gain, Sundaram BNP Paribas Tax Saver or Franklin Taxshield.
We have not taken any sector or theme based funds as you have already invested in Gold ETF. Moreover exposure in sector/theme based fund should always be minimal.
You should consider investing Rs 10,000 every month, that is, Rs 2,500 in each of the four funds for the long-term. Review your equity fund choices every year. Rebalance your portfolio every year to ensure 75:25 equity and debt allocation.
| Top 10 Equity Holdings | |
| Stocks | % Allocation |
| Bharti Airtel | 7.54 |
| HDFC Bank | 5.28 |
| Hindustan Unilever | 5.21 |
| Reliance Industries | 4.83 |
| Infosys Technologies | 4.66 |
| Nestle India | 3.47 |
| HDFC | 3.18 |
| A B B | 2.69 |
| B P C L | 2.52 |
| Oil & Natural Gas Corpn. | 2.45 |
A 10 per cent return per annum on a monthly investment of Rs 10,000 will accumulate into Rs 1.3 crore in 25 years, when you will approach your retirement. The good news is that it is far more than your estimates.
| Top 5 Sector Allocation | |
| Sector | % Allocation |
| Technology | 18.03 |
| Financial Services | 16.25 |
| Energy | 15.32 |
| Consumer Non-Durable | 12.78 |
| Basic/Engineering | 6.34 |
The bad news is that it may not be enough adjusted for the inflation over this period. For this you should consider gradually increasing your investment with rising income as you grow in your job.